Index CPF Life payouts to combat inflation

The Government today markets CPF Life as a lifelong stream of retirement payouts compared with most private annuities that do so for only a limited period, allowing you to retire in peace for your remaining days.

However, is that really the case?

Inflation is a real problem faced in society today.

Economists see a low inflation increase yearly as a sign of a healthy economy.

The Singapore economy faces a general trend of slightly positive inflation rates year by year.

With this constant inflation, $1 today will be worth more than $1 ten years down the road.

With the prevailing amount of monthly payouts handed out to the elderly, their purchasing power will dramatically worsen over the years.

Indexing is a technique used by many countries where payments are adjusted by means of a price index in order to maintain the purchasing power of the public after inflation.

To curb the problem of reducing the value of the CPF Life payouts, the Government can consider indexing the monthly payouts to the inflation rates experienced by the country's economy.

With this, the elderly will then be able to retire comfortably knowing that they are well provided for in the future.

Wayne Yeung

A version of this article appeared in the print edition of The Straits Times on November 15, 2018, with the headline 'Index CPF Life payouts to combat inflation'. Print Edition | Subscribe